Mboniso Sigonyela
Metro Cash & Carry’s newly appointed investor relations director, George Cocolas, has his work cut out as the market softens its stance on the share. This follows a deal that will almost double the group’s revenue from its Australian operations.
Things have not gone well for the group recently. The share went on a downward spiral after the company settled its VAT dispute with the South African Revenue Service a move seen as an admission of guilt by the market. The investment community’s refusal to accept CEO Carlos dos Santos’s explanation that the R80-million was paid to help the group focus on its operations and troubles at its franchise business, Foodies, did not help either.
The Australian deal, which will bring an additional R5-billion in revenue, provided Cocolas with a perfect opportunity to introduce himself to the market earlier this week.
Metcash says it will add 120 Franklins stores to its operations in Australia. Franklin’s parent company, Hong Kong-listed Dairy Farms International, is closing its operations in that country.
The share gained 12c on the news to end the day on Wednesday at 120c. This may be a response to the improvement in Metcash’s Australian counter from Aus40c to 57c over the past month.
The deal will not have any impact on the group’s balance sheet since Metcash says it will not pay anything for the chain. The stores will be sold to independent retailers under the IGA franchise.
Cocolas must be happy with these developments because he sees his role as improving the share price. His experience as a retail and consumer analyst with investment bank Credit Lyonnais SA and, more recently, Merrill Lynch will be more than useful in dealing with a hostile market.
Most analysts applauded the long-overdue appointment, saying it shows that Metcash has finally woken up to the fact that they need to maintain reasonable lines of communication with investors.
“I must admit that the lines were not as good as they should have been and my main priority is to correct that,” says Cocolas.
He says the problems may not have been entirely due to internal issues and holds the view that the market may have been unfair on the valuation of the company.
He plays down the significance of the Foodies problem: “Metcash has minimal exposure to the 15 troubled Foodies stores.”
Cocolas is now faced with the tough task of changing the culture of disclosing as little as possible within Metcash. But he promises that after the next set of results, expected in June, the group will offer more in terms of disclosure.